Low Valuation, Cash Generation Make Nasdaq (NDAQ) an Attractive Takeover Target
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Despite trading near 52-week high levels, Nasdaq OMX (Nasdaq: NDAQ) is one of top exchanges with the lowest price-to-earnings ratio. And that might attract potential suitors.
Bloomberg reports Wednesday that Nasdaq, with a market cap of $5.5 billion, has a PE ratio of 13.5 times, compared with the 22 times ratio drawn by the 11 exchange owners with market caps at or above $5 billion.
Deutsche Boerse might try to make a run at Nasdaq. European regulators halted a bid by Deutsche Boerse for NYSE Euronext in 2012, citing dominance over the regions derivatives trading of the combined company.
Nasdaq's low valuation and strong cash generation could draw private equity firms into the mix. The company has a 9.8 percent free cash flow yield, better than any peer. With $2 billion of debt, one analyst from Wellington thinks the exchange could go for $50 per share, or 50 percent more than Tuesday's close at $33.24.
Bloomberg notes that private equity firm Carlyle Group (Nasdaq: CG) might have a good shot; its CFO, Adena Friedman, served as Nasdaq's CFO up until 2011.
Conversely, other analysts think that the low valuation is given to stock exchanges versus those overseeing other assets. Overall, the consensus is that a merger is inevitable given constant consolidation in the industry. If peers are getting bigger and more diverse, a merger or getting acquired might be the best route.
Shares of Nasdaq are down 0.7 percent.
Bloomberg reports Wednesday that Nasdaq, with a market cap of $5.5 billion, has a PE ratio of 13.5 times, compared with the 22 times ratio drawn by the 11 exchange owners with market caps at or above $5 billion.
Deutsche Boerse might try to make a run at Nasdaq. European regulators halted a bid by Deutsche Boerse for NYSE Euronext in 2012, citing dominance over the regions derivatives trading of the combined company.
Nasdaq's low valuation and strong cash generation could draw private equity firms into the mix. The company has a 9.8 percent free cash flow yield, better than any peer. With $2 billion of debt, one analyst from Wellington thinks the exchange could go for $50 per share, or 50 percent more than Tuesday's close at $33.24.
Bloomberg notes that private equity firm Carlyle Group (Nasdaq: CG) might have a good shot; its CFO, Adena Friedman, served as Nasdaq's CFO up until 2011.
Conversely, other analysts think that the low valuation is given to stock exchanges versus those overseeing other assets. Overall, the consensus is that a merger is inevitable given constant consolidation in the industry. If peers are getting bigger and more diverse, a merger or getting acquired might be the best route.
Shares of Nasdaq are down 0.7 percent.
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